INTRODUCTION TO CAPITAL MARKETSCapital market is a market where buyers and sellers engage in trade of financial securities like bonds, stocks, etc. The buying/selling is undertaken by participants such as individuals and institutions.Capital markets help channelise surplus funds from savers to institutions which then invest them into productive use. Generally, this market trades mostly in long-term securities.Capital market consists of primary markets and secondary markets. Primary markets deal with trade of new issues of stocks and other securities, whereas secondary market deals with the exchange of existing or previously-issued securities. Another important division in the capital market is made on the basis of the nature of security traded, i.e. stock market and bond market.PRIMARY MARKETA market that issues new securities on an exchange. Companies, governments and other groups obtain financing through debt or equity based securities. Primary markets are facilitated by underwriting groups, which consist of investment banks that will set a beginning price range for a given security and then oversee its sale directly to investors.Thefirstgroupofinvestorstowhomanewissueofasecurityissold.Theprimarymarketconsistsoftheissuerandthefirstbuyersoftheissue.Allsubsequenttradingtakesplaceonthesecondary market.Underwritingistheprocessbywhichtheprimarymarketfunctions,thatis,howissuesaresoldtotheprimarybuyers.Theprimarymarketcanattimesbemorevolatilethanthesecondarymarketbecauseitisdifficulttodeterminetheunderlyingvalueofnewissues.Inanycase,theprimarymarketaccountsforonlyaportionoftradeonagiventradingday.Seealso:Rights issue,Preferentialissue,Initial public offering.SECONDARY MARKETThesecondary market, is also calledaftermarket, is thefinancial marketin which previously issuedfinancial instrumentssuch asstock,bonds,options, andfuturesare bought and sold.[1]Another frequent usage of "secondary market" is to refer to loans which are sold by amortgage banktoinvestorssuch asFannie MaeandFreddie Mac.The term "secondary market" is also used to refer to the market for anyused goodsor assets, or an alternative use for an existing product or asset where the customer base is the second market (for example, corn has been traditionally used primarily for food production and feedstock, but a "second" or "third" market has developed for use in ethanol production).With primary issuances of securities or financial instruments, or theprimary market, investors purchase these securities directly fromissuerssuch ascorporationsissuingsharesin anIPOorprivate placement, or directly from the federal government in the case oftreasuries. After the initial issuance, investors can purchase from other investors in the secondary market.The secondary market for a variety of assets can vary fromloansto stocks, from fragmented to centralized, and fromilliquidto very liquid. The major stock exchanges are the most visible example of liquid secondary markets - in this case, for stocks of publicly traded companies. Exchanges such as theNew York Stock Exchange,London Stock ExchangeandNasdaqprovide a centralized, liquid secondary market for the investors who own stocks that trade on those exchanges. Most bonds and structured products trade over the counter, or by phoning the bond desk of ones broker-dealer. Loans sometimes trade online using aLoan Exchange.CONCEPT OF SHARE TRADING